TÁRSZIM

Hungarian tax – benefit microsimulation model

The microsimulation procedure
examines social and economic changes by assessing the effect of each provision
by small units – in our case, households – and the description of the overall
effects is derived from these. The relevance of the results for the society
as a whole is ensured by the database being a national representative sample
of the units or households of such size that guarantees the required statistical
reliability. Naturally, the range of social and economic changes that can
be modelled this way is defined by the information available on the microsimulation
units in the database. In addition to the generally used social and demographic
variables the microsimulation database contains detailed information on
households related to five areas: income, consumption, taxation, participation
in various social transfers and job market position.

No survey is available
that examines the above five areas in the required detail from all aspects.
The execution of a survey like that is not only very costly and time consuming,
but would not be reasonable due to reliability aspects, either. For these
reasons we have created the microsimulation database by merging various
data sets. The sets that were used are: the Monitor of TÁRKI, the Household
Budget survey of Central Statistical Office and the actual (anonymous)
tax returns from the APEH (Internal/Inland Revenue Service) database. These
sets naturally contain the data of different samples; accordingly, the
most difficult technical task when creating the database was merging the
different data sets. This involved a procedure during which attributes
could be assigned to the actual household of one data set that were not
available in the given data set, but were available on many other households
of another data set. The criteria of how well the matching works is whether
the attributes assigned to the given household come from a household of
the other data set that is similar to the one we are assigning to in the
most significant aspects. At the same time, since the assigned data are
not actually known for the same household, these have to be values that
are not constant and show some distribution. We have selected the multiple
imputation method for solving this task from among the many available statistical
procedures.

Multiple imputation is
a procedure generally used for managing the problem of missing data, where
the missing data are substituted not single values, but more than one values,
the distribution of which is as close as possible to the distribution from
which the missing data would come. In practice, multiple copies of the
data set (hence the term “multiple”) are created and the one containing
the gaps in the data is created, and the missing data is replaced by different
values in each set (hence the term “imputation”). The analysis to be performed
is executed on all data sets created in this way, and the average of the
results will be the result of the analysis based on multiple imputation.
The basic idea behind multiple imputation is used when creating the microsimulation
database so that the non-existing data of households in one data set (TÁRKI
Monitor) that exist in other sets (such as consumption data in the CSO
Household Budget survey) are considered as missing data and are replaced
from these sets. For households providing supplementary data (donors) to
be as similar to the original households as possible, we define categories
based on social and demographic data existing in both surveys. Using these
categories, we can replace the missing attributes of the original household
(recipient) with the data of the donor households which are suitable from
the most aspects. This procedure is multiple imputation based on dynamic
matching. The application of multiple imputation is optimal from the point
of view of the errors created during matching, but results in a complex
data structure that requires special programs to manage it.

We have selected the MS
Access database management system as the software tool for modelling on
the microsimulation database, but Access need not be installed on a computer
to be anble to run the microsimulation program.

The structure of the microsimulation model:

MODEL SPECIFICATION

Income tax

Type of taxation

Taxation of income

Tax allowance

Tax schedule

Interest tax

Insurance tax

Indirect taxes

National Insurance / Social Security

Benefits

Essential data

Pension and unemployment allowance

Income support welfare assistance for unemployed

Family allowance

Child care allowance, child care support and maternity support

New benefits

CALCULATIONS

ANALYSIS

The same methodology can be applied to data from other countries and
for international comparison.